In February 1982, AMD signed a contract with Intel, becoming a licensed second-source manufacturer of 8086 and 8088 processors. IBM wanted to use the Intel 8088 in its IBM PC, but IBM's policy at the time was to require at least two sources for its chips. AMD later produced the Am286 under the same arrangement, but Intel canceled the agreement in 1986 and refused to convey technical details of the i386 part. AMD challenged Intel's decision to cancel the agreement and won in arbitration, but Intel disputed this decision. A long legal dispute followed, ending in 1994 when the Supreme Court of California sided with AMD. Subsequent legal disputes centered on whether AMD had legal rights to use derivatives of Intel's microcode. In the face of uncertainty, AMD was forced to develop "clean room" versions of Intel code.
In 1991, AMD released the Am386, its clone of the Intel 386 processor. It took less than a year for the company to sell a million units. Later, the Am486 was used by a number of large original equipment manufacturers, including Compaq, and proved popular. Another Am486-based product, the Am5x86, continued AMD's success as a low-price alternative. However, as product cycles shortened in the PC industry, the process of reverse engineering Intel's products became an ever less viable strategy for AMD.
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